The U.S. Seventh Circuit Court of Appeals has issued the latest, but undoubtedly not the last, decision in the fight over the Emerald Casino license. The Opinion offers some important lessons for anyone who wants to be involved in legal gaming.

First, a disclaimer: I was an expert witness for the Illinois Gaming Board in the hearing before Judge Abner Mikva, which resulted in the Board revoking Emerald’s gaming license on December 20, 2005. Emerald’s challenge to that revocation order is pending before the Illinois appellate court, so I will not discuss the merits of the case.

The Seventh Circuit’s 19-page-long Opinion also does not touch on whether Emerald is fit to be licensed. Instead, it focuses on procedure, and what even lawyers might consider minutia. Yet, hundreds of millions of dollars and the right to operate the closest casino to Chicago are at stake.

Because the stakes are so high, the fight has been going on for more than ten years, and has been fought in administrative hearings; Illinois trial, appellate and supreme courts; federal bankruptcy, district and appellate courts; and the state legislature. It has led to some bizarre situations, including the Illinois Attorney General suing the Illinois Gaming Board and its members; and, after the Board turned down Emerald’s application, the state legislature amending the Illinois Riverboat Gambling Act to require the Board to issue Emerald a license.

The most recent Opinion involves attempts by Emerald and the Village of Rosemont to get a federal court to prevent the Board from revoking Emerald’s license. Rosemont, near the Chicago Airport, has an interest because it spent millions of dollars building a parking garage “in the hopes that a casino would open soon within the Village.” It would like Emerald to pay for that, but Emerald’s only asset is its gaming license – which the Board says it revoked.

One of the questions raised by the dispute is whether a party who has been denied a gaming license should receive a share of the proceeds anyway. Of course, if there is no license, then there is nothing to sell.

In 1997 the Board first turned down Emerald’s application to move its riverboat casino from the Mississippi River to Rosemont. The Illinois General Assembly got involved. It passed an amendment to the Riverboat Gaming Act that appears to undercut the entire purpose of having regulators. It stated that “the Board shall grant the application” of a company (matching Emerald’s description) applying for a casino license.

I don’t know if the lawmakers did not understand the difference between “shall” and “may.”

But the Act also never mentioned whether that license could then be immediately revoked.

One issue that worries everyone with a gaming license is, “What happens if the regulators who have approved us are replaced by individuals who don’t like us?” At one point, Emerald had convinced the Board to let it sell its license for half-a-billion dollars. But those Board members were replaced by ones who wanted to simply revoke the license and issue it to someone else.

The federal Court of Appeals ruled that the new members had the right to do that. Just as one Congress cannot bind a later Congress, so a casino regulatory agency cannot bind future regulators.

It was probably the right decision. What power does a state have if it cannot take away a license? Regulators would never give any licenses if they could never be revoked.